Application of Ethical Theories to Leadership

Ethical Leadership

Introduction

We live in a world where there is a great expectation on organisations to model ethical leadership. Businesses have been given greater corporate social responsibility by governments in terms of protecting the environment and supporting their local communities in addition to managing their own organisations, therefore customers now demand that businesses adopt ethical principles and form ethical decisions, to choose not to, organisations risk damaging their social licence and ultimately the business success therefore ethics in business is vital.

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According to Navran, ethics are “the study of what we understand to be good and right behaviour and how people make those judgements” (Anon, 2010) therefore understandably, ethical decisions may be different for different people, in different situations and in different business environments. There are five well known categories of ethical theory: utilitarianism; egoism; relativism; deontologism and; ethics of virtue. The five theories will be reviewed within this essay to show that ethical decisions in business derive from one of these theories. But which ethical theory is most dominant from the rest in the world of business?

Casali (2011) states that “people do not necessarily fit into one category or draw from only one framework to make ethical decisions in all situations” which would insinuate that there is no ethical front-runner in decision making, however there is a growing body of data that alludes that utilitarianism (ethics of consequence) and deontologism (ethics of duty) are most recognisably applied in the business world over all others and this will be examined further to determine which theory, if any, will reign the supreme Goddess of ethical theories?

Ethical Leadership

Ethical responsibilities of organisations have evolved over time and now “reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of [their] moral rights” (Caroll, 1991). As previously mentioned there are five well-known categories of ethical theory within which business leaders will make decisions to determine what is right or wrong and these are: utilitarianism; egoism; relativism; deontologism and; ethics of virtue. Within this section, each of these five ethical theories will be explored and examples provided of when each are applied in business. Finally, utilitarianism and deontologism will be examined to determine which of these two theories is the most dominant in the business world.

Let us first analyse utilitarianism. According to Casali (2011), there are two forms of utilitarianism: act utilitarianism and rule utilitarianism. Act utilitarianism embraces the idea that each individual action should be evaluated to ensure the greatest overall good. Similarly rule utilitarianism assumes the idea that action should ensure the greatest benefit to the majority however those actions should be derived from rules. For the purposes of this analysis, one will assume the overarching representation that utilitarianism is the theory that “decisions are moral [whether deemed right or wrong] if they lead to the greatest degree of benefit for all concerned” (Aronson, 2001). Due to this definition, utilitarianism is often referred to as teleology or ethics of consequence. Ethics of consequence focussing on whether or not a decision is right by the consequences of that decision, or in other words, “the end justifies the means” (Anon, 2018). This theory could not be more relevant than in the military where the idea of “the greater good is always the primary motivation … individuals do not matter, only the mission, and the survival of the nation” (Lindsey, 2017). Society does not agree with murder, it is unethical and immoral, however when murder occurs during battle, the view changes from murder being morally wrong to murder being acceptable given that the military are protecting the country and the ‘greatest number of people’. Utilitarianism is also apparent in the political environment, for example, politicians decide how much taxes people pay, which is different depending on how much an individual earns but why should it be different? In addition, people who pay less tax or in the case of unemployment, no tax at all, collect monetary benefits from the government that comes from the money that taxpayers who work provide. Why does society accept this and not demand that all people pay the same taxes and collect the same monetary benefit? Although this appears unfair, society accepts this because (1) the majority of people are in the lower earnings category and therefore unaffected by high taxes, (2) there is no such thing as job security therefore one does not know when one would be unemployed and require these benefits and (3) it is all for the greater good of the economy and the country as a whole. Lastly, utilitarianism is present within corporations such as Diageo, Malboro, McDonalds, KFC and Cadbury. These organisations manufacture and sell products which can cause harm to individuals (for example, Diageo sell alcohol which can cause alcoholism and cirrhosis of the liver, Malboro sell cigarettes which are well known for causing cancer and McDonalds, KFC and Cadbury sell unhealthy foods which can lead to diabetes, fatty liver and obesity), however regardless, these organisations continue to manufacture these products. Why? Despite the fact that the products can be detrimental and harmful and therefore it may seem unethical to sell these products, there is a high market demand for them because they are ‘pleasurable’ and therefore society accepts the continued manufacturing and selling of the products that ultimately can cause harm to individuals. The latter example could similarly be a reflection of another consequential theory, egoism.

Similar to utilitarianism, egoism is a theory based on ethics of consequence. Stirner’s (1907) quote characterises egoism as “the belief that men not moved by a sense of duty will be unkind or unjust to others is but an indirect confession that those who hold that belief are greatly interested in having others live for them rather than for themselves.” A simpler term explained by Johnson (2018) is that “egoists believe that everyone is or ought to be selfish and act completely and always out of self-interest”. An example of this in business would be in the case of Volkswagen who made the conscious decision to deceive emissions regulators and customers by introducing software that manipulated data during testing to show that their vehicles adhered to the required regulations when they did not. The reason for Volkswagen making such an unethical decision was because they wanted to remain a global competitor and therefore opted to do what was right for the business remaining cost competitive and ensuring their cars would sell due to fuel efficiency and driving performance (Voelcker, 2015). This was Volkswagen leadership taking a chance and putting the business needs first before the customer or society however as Volkswagen eventually found out, was a dangerous route to take and resulted in fines of up to $1billion as well as criminal charges and damage to the organisations social licence. Because of the potential consequences, not every organisation would choose to take the risk and deceive their customers, as in the case of Volkswagen, therefore it is apparent that different people make different decisions for different reasons such as in the theory of relativism.

Relativism is a theory defined as “different strokes for different folks” (Anon, 2018) and is based on the belief that what is deemed moral for one individual may not be deemed moral for another and there is no overarching authoritarian to decide what is right or wrong (Kölbel, 2018). Donaldson and Dunfee (1994) therefore reason that this theory endorses “a confusing and corrupt array of incommensurate moral systems and principles.” An example of this in business is in the case of Foxconn Technology who manufacture Apple products (such as the iPad and iPod) and have been found to place immense pressure on their employees in order to meet the extremely high demand for Apple products. For instance, employees are required to work excessive amounts of overtime, are exposed to unhealthy and unsafe working conditions as well as “public humiliation” if their performance is not of the required standard and are subject to “draconian supervision” and strict rules (Fryer, 2015). The pressures are so severe that this has been linked to a series of suicides amongst Foxconn employees. This type of pressure would be unacceptable under EU legislation and most likely in the rest of the Western world however has been accepted by Foxconn because of the “cultural, economic and social factors that shape employment practices in China” (Fryer, 2015) therefore the decision is based on relevance to the context, not relevance to consequence or relevance to one’s duty, such as in the case of utilitarianism or deontologism.

Deontologism, also referred to as ethics of duty, is the contrasting theory to utilitarianism and egoism in that is non-consequentialist (Anon, 2014). According to Alexander and Moore (2016) there are three types of deontological theories: agent-centred deontology; patient-centred deontology and; contractarian deontology. Agent-centred deontology is described by Alexander and Moore (2016) as an obligation to keep oneself “free from moral taint” and is very much duty based. Patient-centred deontology is similar to agent-centre deontology except that this is “rights based” and expands the obligation to protect the rights of all people. Contractarian deontology, as depicted by Cudd and Eftekhari (2017) is “legitimate authority … [which] must derive from consent of the governed, where the form and content of this consent derives from the idea of contract or mutual agreement”. Based on this theory, one could rightly believe that contractarianism is comparable to utilitarianism with the contrast being that individuals must consent to the action or decision, however regardless of the similarities, remains a deontological theory. All three types of deontological theory are overarched by Kant’s ideology that consequences of pleasure (as in the case of utilitarianism) “are irrelevant”, and that one should “act as to treat humanity, whether in your own person or in that of any other, in every case as an end in itself, never as a means only.” Misselbrook (2013). Deontology as a whole is therefore the theory that “no matter how morally good their consequences, some choices are morally forbidden” (Alexander and Moore, 2016). The medical profession recognises this theory when a Doctor must make a decision or take an action primarily based on consent from the patient (Mandal, Ponnambath and Parija, 2016) which is deemed as a decision of duty. For example, patients may sign a DNR (do not resuscitate) order where in the event that their heart stops beating, medical staff will not intervene even if by intervening this could bring the patient back to life. Alternatively, in the case of euthanasia (which is legal in a number of different countries) a medical professional can assist a patient to commit suicide. Neither of these decisions seeming morally right, in fact they strongly appear to be morally wrong except to the individuals who are committed to their ‘duty’. Another profession compelled by duty of ethics is the legal profession. Geisel (2015) states that “the duty of confidentiality places ethical restrictions on a lawyer’s disclosure of information relating to the representation of the client.” Not only do lawyers have a duty to their clients to keep certain information confidential after disclosure even although that information could be useful in convicting the client for a criminal offence and without it the client could go unpunished, the fact that a lawyer must represent a criminal at all is questionable in itself. Therefore, why does society accept that this is right? Both the medical and legal professions have to make decisions and the outcomes of which to society, appear morally wrong, yet both occupations are greatly respected therefore it would appear that the deontological decisions taken by both medics and lawyers are accepted and are ethically right albeit the consequences may be morally wrong.

Ethics of virtue, according to Soloman, is a “virtue based theory which holds that individual business people as well as business organizations should possess certain characteristics, that is virtues, in order to excel morally” (Kaptein, 2008). According to Gini and Green (2013) there are “ten virtues that business leaders should possess: deep honesty; moral courage; moral vision; compassion and care; fairness; intellectual excellence; good timing; creative thinking; aesthetic sensitivity and; deep selflessness”. These ten virtues are likely prevalent within charitable organisations and foundations. The United Nations Foundation for example is a global organisation, created to “tackle issues including climate change, global health, peace and security, women’s empowerment, poverty eradication and energy access.” (Caminiti, 2016). In addition, charities such as Children in Need or Comic Relief appeal to society to support fundraising efforts every year to help children in poverty and every year society entrusts these charities with their hard-earned money believing that the money will be collated and distributed to those who are in desperate need of this. Society would not depart from their money if they did not believe that these types of charities and foundations are honest and good and have a high standard of ethics who put the needs of others first. However, these organisations are little fish in a giant ocean of organisations whom tend to make decisions of consequence or duty.

Without establishing the ethical leadership decisions within every organisation the world over, evidence has been gathered from academic sources to determine which ethical theory, if any, is the most dominant of all theories in the business world. Casali (2011) states that “people do not necessarily fit into one category or draw from only one framework to make ethical decisions in all situations” and Dawson (2005) proclaims there is no universal philosophical agreement among ethicists about which theory ‘trumps’ the others as the universal master, however according to Soloman (2007):

Business ethics, like most areas of ethics, often tends to focus on principles of action, on the action itself and its consequences. The most common contrast, typically presented as the focus of debate on most ethical issues, is between Kant and “deontology”, on the one hand, and Bentham, Mill and “utilitarianism” on the other.

Advocating the argument that utilitarianism is the most dominant theory, Nathanson (2018) proclaims that Bentham and Mill’s utilitarian theory “has had a major impact … on approaches to economic, political and social policy … [and] there are many 21^st century thinkers that support it”. In addition, Boylan (2014) upholds that:

Utilitarianism … [with] emphasis upon calculating quantitatively the general population’s projected consequential utility among competing alternatives, appeals to many of the same principles that underlie democracy and capitalism (which is why this theory has always been very popular in the USA and other Western capitalistic democracies). Because … it is a realistic theory”.

As previously discussed, deontology does feature in ethical decision making within the legal and medical professions and other similar organisations however organisations such as the Military, large corporations such as McDonalds and Diageo and large Political organisations cannot afford to serve an individual and must, for their success, base ethical leadership decisions on what is best ‘for the greatest number of people’ which is the utilitarian approach. Therefore this implies that utilitarianism is the most dominant ethical theory.

Conclusion

It is clear that there is a demand from stakeholders for organisations to make ethical decisions and the five ethical theories of utilitarianism, egoism, relativism, deontologism and ethics of virtue have been reviewed to illustrate that these ethical theories are prevalent in business.

Academic literature has been examined to determine that contrary to the findings of Casalli (2011) and Dawson (2005) there are dominant ethical theories applied by leadership within business, the most dominant being utilitarianism and deontologism. Having investigated the types of organisations that would apply each theory and based on the conclusions of other academics and professional theorists, one would agree with Nathanson (2018) and Boylan (2014) that utilitarianism is the dominant theory used within business and therefore is reigned the Goddess of ethical theories.

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